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Number Crunching

Wind power. The love affair between wind power and environmentalists is well known. The impact to the environment is none and the promise of free fuel tantalizing. For many, wind power appears to be the future of energy.

There is little disagreement on one of the drawbacks of wind energy: the high startup cost. The European Wind Energy Association, EWEA, gives an estimate of $1555 per KW of installed capacity. According the American Wind Energy Association, AWEA, with an average capacity of industrial wind turbines in the US standing at about 1.75MW, the cost to install an average wind turbine in the United States is $2,721,000.

Such a turbine could theoretically put out 15330MW of electricity, thus making the cost to produce one MW of electricity $8.87. But that number is far from reality. Wind power is inherently intermittent; it cannot produce electricity all of the time.

Of course, before anything else, the capacity factor of turbines must be taken into account. It is not realistic to believe that any source of energy can output its total installed capacity all of the time. Downtime for maintenance is always a factor. For most sources of energy, the capacity factor is estimated at about 90 percent. Wind, on the other hand, is only blowing at a useable speed 80-90 percent of the time. Wind, even when producing energy, blows at variable speeds and often not at the precise optimal speed for maximum energy production. As a result, the capacity factor of wind is estimated at 25 percent, by the EWEA’s numbers. While in comparison to base load energy providers the number seems low, it is actually fairly good when compared to other intermittent power sources. Solar, for example, clocks in at 15 percent. Factoring this in, the cost per MW is $35.50.

Even this isn’t an accurate representation of the costs of wind power. As any car owner would know, the price tag is only part of the story: things break and must then be repaired. Many advocates for wind power argue that O&M costs for wind power are low and negligible. At the level of 3-5 percent of capital cost per year, it would appear to be true. Yet 3 percent of $3 million is large. Studies show that in the United States O&M costs average $27 for each MW produced. A turbine of 1.75MW would cost $124,000 each year. When added up over 20 year the resulting sum is $2,484,000: Almost as much as the capital costs. Factor this into the price, and the cost per MW rises to $62.50.

But there is even more to this story. It cost $62 to generate 1 MW of wind energy. To make it useful to the consumer, the electricity must get to them. Additional costs come from transmitting electricity across the grid, which, just like anything else, has capital cost and operating and maintenance. Moreover, the farther the electricity has to travel, the more it loses it charge. In other words, energy is wasted during transmission. Transmission costs, average at about $15 per MW produced. This cost is generally under $25 but can cost as much as $79 per MW in more extreme circumstances. The cost per MW then rises to $77.50.

This is notably higher than the numbers the EWEA gives for gas and coal, $53.88 and $61.16 per MW respectively. However, $77.50 only represents production costs. The price paid by the consumer is, of course, going to be higher.

Groups now claim that wind power is cheaper than fossil fuels. While the numbers given above are only estimates based on industry averages, it is illogical that the market alone would produce such results. This does not mean those studies are wrong, but rather that government subsidies play a role in the lowered cost. The federal government spent just under 5 billion in 2010 subsidizing wind energy either by contributing to R&D, financing installation of wind farms, or tax breaks for the wind industry. With wind energy production at about 95 million MW, the government spent about $52 for each MW of electricity produced—more than enough to artificially level the field between wind and fossil fuels.

It is often said that number don’t lie, but people do. Yet sometimes, the deception isn’t even intentional. What happens more often than not is that the numbers are not carefully considered and thus are misrepresented—by either the presenter or the reader of the information. In short, it is always worth the time to consider exactly what a number means and often more importantly, what it does not.